7 Consumer Stocks That Do Best During Inflation

According to the US Bureau of Labor Statistics, inflation in the United States reached a four-decade high in June 2022, with prices jumping 9.1%. This has obviously rattled investors who are concerned about spending cuts as Americans seek to ease pain at the grocery aisle and gas pump.

Despite these days of upheaval, several consumer stocks still have a lot to offer. Wall Street experts are being hit by the same inflation rate that we are, yet they are pretty bullish on a certain group of companies right now. This is because they are closely analyzing financial data on individual companies while also keeping an eye on consumer price data.

These experts are now giving top marks to some consumer stocks that surprisingly do best during high inflation. Some companies were taken by surprise as their share prices rise in a down market. Some of them seem like bargains after pessimistic investors overreacted by selling off shares sharply, while others have long-term potential growth that makes them look inviting if you ignore short-term disruptions.

Depending on your personal investing strategies, one of these 7 consumer stocks may be worth considering even as we face uncertainty in the coming year.

bath&body works
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1. Bath & Body Works, Inc. 

In mid-2021, Bath & Body Works (BBWI) separated from Victoria’s Secret & Co. That originally benefitted BBWI stock, which rallied substantially until the end of last year. However, BBWI stock is currently down approximately 50% due to a recent risk-off environment.

Still, the long-term prospects look quite bright. You may be wondering why. Well, Bath & Body Works, as a personal care products company, has loyal customers who’d rather choose the same brand than shop around to save money on low-quality items or new products that don’t fit their personal routines and tastes.

BBWI consumer stock now has a Strong Buy rating and a $45 price target, as stated by Raymond James analysts. They claim that as comparable sales stabilize and as shopping trends and supply chain return to pre-pandemic levels, this retailer will have a much brighter future.

2. Costco Wholesale Corp.

A lot of people love Costco. From its popular signature label brand Kirkland to great discounts on gasoline and bulk products, this wholesale giant has thousands of affordable products on shelves. Just ask a Costco member and you’ll know exactly why they prefer to shop there.

This loyalty is especially important during inflationary times as customers are becoming more frugal with their spending. Costco consumer stock was already on the rise after it ended its 2021 fiscal year with a nearly 18% increase in net sales. In addition, the 2022 fiscal year is likely to also witness a growth of 5%-10% in sales.

The interesting part of the story is that earnings per share are expected to rise from $11.27 in 2021 to $13.1 in 2022 and $14.54 in 2023.

3. LCI Industries

Following the coronavirus pandemic, there have been several major changes in American consumer culture, including a desire for reconnecting with the great outdoors and getting out of the city.

This trend turned out to be a boon for LCI Industries, a company that produces and maintains recreational vehicles. It’s not just these vehicles that made buyers spend six figures on a motor home. Awnings, portable patio furniture, television and sound systems, and premium mattresses, are all examples of after-market equipment that provide amazing comforts for those who are looking to get away.

In the 2022 fiscal year, LCCI Industries expects to boost its revenue by 25%. Also, earnings are increasing at a fast rate of 60% every year. However, there’s certainly a risk that comes along with this consumer stock, as there is SOME gamble for all stocks in 2022.

Even so, as recreation vehicles are clearly a big-ticket purchase, they tend to generate more resilient sales than other cars in a downturn. That should provide some stability, even amid difficult economic times.

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4. Lowe’s Companies Inc.

Our next consumer stock suggestion comes from one of the two biggest home improvement retailers in the US. There is a duopoly between Lowe’s Comapnies Inc. (LOW) and its competitor Home Depot, but when it comes to bullish outlooks and Wall Street expectations, the former is the consumer stock you should consider.

Both companies’ mature domestic operations are growing at a single rate in terms of sales and earnings. Lowe’s, on the other hand, has a price-to-sales ratio of around 1.3 and a forward price-to-earnings ratio of less than 14, while Home Depot has a price-to-sales ratio of 2.0 and a forwards price-to-earnings ratio of 18.

In addition, Lowe’s tends to receive greater support among Wall Street experts. For instance, in June, Wells Fargo reiterated its Overweight rating, and Davidson, Jefferies, and Truist all rated the consumer stock Buy in May.

The price target of about $240 per share implies a 30% upside and represents one of the best options among consumer stocks right now.

5. Nike Inc.

As one of the world’s biggest consumer brands, Nike Inc. (NKE) definitely has staying power. Not only is Nike Inc. a sportswear giant, but it’s also a force in direct-to-consume sales following the pandemic. Their strategy implies cutting out intermediaries to keep inflation at bay, reap bigger margins, and deliver shareholder value.

Although coronavirus restrictions in China have had an impact on the company due to disappointing international sales performance and supply chain disruptions, things are starting to normalize.

Wall Street is currently forecasting a 10% increase in revenue both this fiscal year as well as the next one. Barclays, Goldman, Cowen, Guggenheim, Wedbush, and Deutsche Bank all have been recommending this top consumer stock multiple times since June.

tapestry inc
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6. Tapestry, Inc.

Tapestry, Inc. is the parent company of luxury brands Kate Spade, Stuart Weitzman, and Coach products and apparel. Their product lines include fashion accessories, handbags, eyewear, jewelry, and fragrances. The company also owns about 2,000 retail locations where these goods are sold directly to consumers.

Tapestry, which is a brand family, has weathered a rough climate better than other competitors thanks to its powerful strategy, as well as the pricing power that comes with luxurious and high-quality offerings. More precisely, Tapestry, Inc. expects a 15% to 20% growth this year, despite inflationary headwinds and cutbacks measures weighing on other consumer stocks.

On top of that, strong international sales, particularly in mainland China, will create some opportunities that other consumer stocks don’t enjoy.

7. MercadoLibre, Inc. 

Many e-commerce companies — including Amazon —have crashed and burned due to the coronavirus pandemic. But not MercadoLibre. The international retailer remains highly rated offering a great long-term outlook.

MercadoLibre is also named the Amazon of Latin America. It runs an internet marketplace focused on the consumer and dominates the most lucrative and populous regions in the area, including big city centers in Argentina and Brazil.

Thanks to its quick expansion, Wall Street anticipates a 50% revenue growth this fiscal year and another 30% in 2023. Profitability is also on the rise, with earnings expected to grow five times in fiscal 2022.

Despite broader volatility, Wall Street experts remain positive, with Goldman, Citi, Credit Suisse, New Street Research and others rating the consumer stock Buy or better in recent months. This is definitely a good thing for investors who can look past headlines and see the long-term potential in this consumer stock.

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